Nearly 8.5 million people moved out of poverty last year, an unprecedented change in a single year that is largely attributed to stimulus payments. Poverty in the United States is defined as a family of four living on less than about $26,250 a year.
As the economy recovers from the depths of the coronavirus pandemic, White House officials hope that more Americans will be able to find good-paying jobs that will keep them out of poverty. But deep inequalities remain, and there are troubling signs that the recovery could stall. Black and Hispanic women continue to lag the recovery, as do Americans without college degrees. Meanwhile, the strong employment gains of early summer have faded as the rise in coronavirus cases, especially among the unvaccinated, weighs on spending and hiring.
President Biden is urging Congress to enact more programs to help the poor and working class as part of a $3.5 trillion package that would make major investments in many parts of the economy. Top White House advisers point to the success of pandemic relief as an example of how additional resources can make a dramatic difference in reducing poverty and hardship. But conservatives argue that safety net programs exacerbate worker shortages and unnecessarily increase already skyrocketing federal debt levels.
Economists and economic policy experts credit the extensive federal relief funds enacted during the coronavirus pandemic with averting another Great Depression. Looking at individual programs, the stimulus payments alone, without taking into account spending and other factors, would have lifted 11.7 million people out of poverty, Census officials estimate. And they said improved jobless benefits kept 5.5 million people from falling into poverty. Another report last week showed that, thanks to the benefits, hunger did not increase in 2020.
The annual census results also underscored the profound impact of so many job losses last year. Median earnings fell sharply, down 2.9% to $67,521, and the number of people without health insurance through 2020 grew to 28 million, nearly two million more than in 2019. It was the fourth consecutive year in which the ranks of the uninsured grew.
Still, after accounting for government assistance, poverty declined across all age, racial and ethnic groups and educational attainment. Some of the largest declines in poverty were among families headed by single mothers, African Americans, Hispanics, and adults without a high school degree.
According to the Census Bureau, poverty would have soared to 12.7% without the stimulus payments last year, noting that most of the job losses were among workers earning less than $34,000 and with little or no savings. By a second measure, which excludes much of the federal stimulus payments, poverty rose to 11.4% from 10.5%, but experts said that figure does not capture the real effect of government aid.
Biden's "Build Back Better" proposal does not include stimulus checks. But it does include broad financial support for low-income Americans, including universal preschool for 3- and 4-year-olds, higher child care subsidies, more subsidies to help low-income Americans buy health insurance, and more tax credits for the working poor. It would also maintain the expanded child tax credit that currently provides most American families with $300 per month per child under age 6 and $250 per month per child ages 6 to 17. The expanded credit has the potential to cut child poverty in half, experts say.
As for health insurance coverage, the impact of the public health crisis was not as severe as some public policy experts had predicted at the beginning of the pandemic. The increase of 2 million people without health coverage over the course of last year was double that of 2019. Still, the 8.6% of U.S. residents who lacked coverage through 2020 was close to 2018 levels, census officials said.
The main effect on coverage was that the pandemic reduced the number of Americans with private insurance, while increasing the number with some form of public coverage. The proportion of Americans with employment-based coverage was 54.5%, down one percentage point from the previous year. Meanwhile, the proportion covered by Medicaid increased slightly from 17.2 percent in 2019 to 17.8 percent last year.
The insurance findings also highlight long-standing disparities in insurance coverage among racial and ethnic groups that in some cases widened.
While the proportion of white residents who lacked health insurance increased slightly (from 7.8 percent in 2019 to 8.3 percent last year), a much larger proportion of Hispanics were uninsured: 18.3 percent in 2020, up from 16.7 percent the previous year. Among blacks, the uninsured rate increased to 10.4 percent last year, up from 9.6 percent in 2019. People living below the poverty line were much less likely to have health coverage, with a quarter of the poor having no insurance at all last year.
Census data show that the uninsured rate was especially high in a dozen states that have opted out of expanding Medicaid eligibility under the Affordable Care Act, nearly twice as high as the rest of the country. Unlike his predecessor, Biden has pushed for Medicaid expansion in the dozen states that remain on the sidelines, and congressional Democrats are considering proposals that would allow people frozen out of the program by their state governments to purchase private ACA health plans on the cheap.
Beyond the pandemic, the results show that employer-sponsored insurance is shrinking, especially as small and medium-sized businesses find the cost of providing health benefits to their workers out of reach, Mendelson said. As fewer and fewer workers have benefits through their jobs, an increasing number will face the difficult choice of buying health plans through the ACA marketplaces or going without insurance.
It is unclear whether the reduction in poverty will last beyond 2020. Sullivan, the Notre Dame economist, and economist Bruce Meyer of the University of Chicago have attempted to track poverty during the pandemic in "real time." Their analysis shows a slight uptick in poverty in 2021 that worsened slightly in August as coronavirus cases rose again.
Although poverty has declined across the board, racial disparities remain. The percentage of black Americans in poverty is 14.6 percent. compared to 8.1 percent of white Americans, according to supplemental census poverty measures.
What happens next for household income and poverty will depend largely on how many Americans are able to return to work in the coming months and whether the U.S. government extends any help to low-income Americans.